Mastercard enables a wide variety of payment capabilities over its multi-rail network among account holders, merchants, financial institutions, businesses, governments, and others.
The core payment network links issuers and acquirers globally to facilitate the switching of transactions, allowing account holders to use a Mastercard product at millions of acceptance locations worldwide.
The network facilitates an efficient, safe, and secure means for receiving payments, a convenient, quick, and secure payment method for consumers to access their funds, and a channel for businesses to receive insight through information derived from the network.
Mastercard enables transactions for its customers through its core payment network in more than 150 currencies and in more than 210 countries and territories.
The core payment network supports a “four-party” payments network, which includes the account holder, issuer, merchant, and acquirer.
Mastercard’s role in a typical transaction on its core payment network includes payment security, value-added services, and the enablement of digital payments.
How does a typical transaction through Mastercard work?
In a typical transaction, an account holder purchases goods or services from a merchant using a Mastercard product. After the transaction is authorized by the issuer, the issuer pays the acquirer an amount equal to the value of the transaction, minus the interchange fee and other applicable fees.
Interchange fees reflect the value merchants receive from accepting Mastercard products and play a key role in balancing the costs and benefits that consumers and merchants derive. These fees are collected from acquirers and paid to issuers to reimburse the issuers for a portion of the costs incurred.
The merchant discount rate is established by the acquirer to cover its costs of both participating in the four-party system and providing services to merchants. The rate takes into consideration the amount of the interchange fee which the acquirer generally pays to the issuer.
Through Mastercard’s core payment network, they enable the routing of a transaction to the issuer for its approval, facilitate the exchange of financial transaction information between issuers and acquirers after a successfully conducted transaction, and settle the transaction by facilitating the exchange of funds between parties via settlement banks chosen by Mastercard and its customers.
Mastercard’s core payment network switches transactions throughout the world when the merchant country and country of issuance are different (“cross-border transactions”), providing account holders with the ability to use, and merchants to accept, Mastercard products and services across country borders.
Mastercard guarantees the settlement of many of the transactions from issuers to acquirers to ensure the integrity of its core payment network. However, it does not guarantee payments to merchants by their acquirers or the availability of unspent prepaid account holder account balances.
Mastercard’s core payment network features a globally integrated structure that provides scale for its issuers, enabling them to expand into regional and global markets. It is based largely on a distributed (peer-to-peer) architecture that enables the network to adapt to the needs of each transaction.
Mastercard is primarily owned by the Mastercard Foundation, which owns 10.7% of the company’s stocks, followed by The Vanguard Group, 8.2%, and BlackRock, 6.8%. Mastercard generated over $22 billion in revenue in 2022 and over $9.9 billion in profits (net income).
Mastercard’s revenue in 2020 was $15.3 billion.
The revenue increased to $18.88 billion in 2021.
By 2022, Mastercard’s revenue had grown further to $22.24 billion.
The growth in revenue from 2020 to 2021 was approximately 23.4%.
The growth in revenue from 2021 to 2022 was approximately 17.8%.
Over the three-year period from 2020 to 2022, Mastercard’s revenue increased by approximately 45.3%.
In 2020, Mastercard’s net income was $6.41 billion.
The net income increased to $8.68 billion in 2021.
By 2022, Mastercard’s net income had grown further to $9.93 billion.
The growth in net income from 2020 to 2021 was approximately 35.4%.
The growth in net income from 2021 to 2022 was approximately 14.4%.
Over the three-year period from 2020 to 2022, Mastercard’s net income increased by approximately 54.9%.
Visa is primarily owned by institutional investors like The Vanguard Group, with an 8.62% ownership stake, and BlackRock, with a 7.75 ownership stake. Some top individual shareholders comprise Chairman of the Board of Directors Alfred Kelly, President of Technology Rajat Taneja, and CEO Ryan Mclnerney.
Visa’s revenue in 2020 was $21.84 billion.
In 2021, Visa’s revenue increased to $24.1 billion.
By 2022, Visa’s revenue had grown further to $29.31 billion.
The revenue growth from 2020 to 2021 was approximately 10.4%.
The revenue growth from 2021 to 2022 was approximately 21.6%.
Over the three-year period from 2020 to 2022, Visa’s revenue increased by approximately 34.2%.
In 2020, Visa’s payment volume was $8.8 trillion.
The payment volume increased to $10.4 trillion in 2021.
By 2022, Visa’s payment volume had grown further to $11.6 trillion.
The growth in payment volume from 2020 to 2021 was approximately 18.2%.
The growth in payment volume from 2021 to 2022 was approximately 11.5%.
Over the three-year period from 2020 to 2022, Visa’s payment volume increased by approximately 31.8%.
In 2020, Visa processed 140.8 billion transactions.
The number of transactions processed increased to 164.7 billion in 2021.
By 2022, Visa had processed 192.5 billion transactions.
The growth in transactions processed from 2020 to 2021 was approximately 16.9%.
The growth in transactions processed from 2021 to 2022 was approximately 16.8%.
Over the three-year period from 2020 to 2022, the number of transactions processed by Visa increased by approximately 36.7%.
In 2020, Visa’s net income was $10.86 billion.
The net income increased to $12.31 billion in 2021.
By 2022, Visa’s net income had grown further to $14.96 billion.
The growth in net income from 2020 to 2021 was approximately 13.3%.
The growth in net income from 2021 to 2022 was approximately 21.5%.
Over the three-year period from 2020 to 2022, Visa’s net income increased by approximately 37.8%.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
